Correlation Between Earthstone Energy and GeoPark

Can any of the company-specific risk be diversified away by investing in both Earthstone Energy and GeoPark at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Earthstone Energy and GeoPark into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Earthstone Energy and GeoPark, you can compare the effects of market volatilities on Earthstone Energy and GeoPark and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Earthstone Energy with a short position of GeoPark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Earthstone Energy and GeoPark.

Diversification Opportunities for Earthstone Energy and GeoPark

0.0

Correlation Coefficient

Earthstone Energy  GeoPark

Pay attention - limited upside

The 3 months correlation between Earthstone and GeoPark is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Earthstone Energy and GeoPark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoPark and Earthstone Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Earthstone Energy are associated (or correlated) with GeoPark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoPark has no effect on the direction of Earthstone Energy i.e., Earthstone Energy and GeoPark go up and down completely randomly.

Pair Corralation between Earthstone Energy and GeoPark

If you would invest (100.00) in Earthstone Energy on December 30, 2024 and sell it today you would earn a total of  100.00  from holding Earthstone Energy or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Earthstone Energy  vs.  GeoPark

Earthstone Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Earthstone Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Earthstone Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

GeoPark

Risk-Adjusted Performance

Very Weak

Over the last 90 days GeoPark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Earthstone Energy and GeoPark

The main advantage of trading using opposite Earthstone Energy and GeoPark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Earthstone Energy position performs unexpectedly, GeoPark can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GeoPark will offset losses from the drop in GeoPark's long position.

The idea behind Earthstone Energy and GeoPark pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..